M/s Quick Energy, Kolkata v. DCIT, CIR-43, KOLKATA, Kolkata

ITA 530/KOL/2016 | 2008-2009
Pronouncement Date: 22-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 53023514 RSA 2016
Assessee PAN AAAFQ1206E
Bench Kolkata
Appeal Number ITA 530/KOL/2016
Duration Of Justice 1 year(s) 7 month(s) 24 day(s)
Appellant M/s Quick Energy, Kolkata
Respondent DCIT, CIR-43, KOLKATA, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 22-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 22-11-2017
Last Hearing Date 16-11-2017
First Hearing Date 16-11-2017
Assessment Year 2008-2009
Appeal Filed On 28-03-2016
Judgment Text
ITA NO.530/KOL/2016 M/S. QUICK ENERGY A.Y.2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN JM & SHRI WASE EM AHMED AM] I.T.A NO.530/KOL/2016 ASSESSMENT YEAR : 2008-09 M/S. QUICK ENERGY . -VS.- D.C.I.T. CIRC LE-43 KOLKATA KOLKATA [PAN : AAAFQ 1206 E) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.JHAJHARIA AR FOR THE RESPONDENT : SHRI SOUMYAJIT DASG UPTA ADDL. CIT SR.DR DATE OF HEARING : 16.11.2017. DATE OF PRONOUNCEMENT : 22.11.2017 ORDER PER N.V.VASUDEVAN JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED.18.01.2016 OF. C.I.T.(A)-21 KOLKATA RELATING TO A.Y. 2008-09. 2. GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE READ AS FOLLOWS :- 1. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN DISMISSING THE APPEAL AND CONFIRMING THE ARBITRARY ADDITION OF GROSS PROFIT IN THE TRADING A /C AND ESTIMATED ADHOC DISALLOWANCE OF EXPENSES MADE IN THE ASSESSMENT BUT DISPUTED IN APPEAL WITHOUT ANY APPLICATION OF MIND AND LOOKING INTO THE PROPER FACTS AND MERIT OF THE CASE AND ALSO WITHOUT GIVING ADEQUATE AND REASONABLE OPP ORTUNITY OF HEARING TO THE ASSESSEE FIRM. THE PERVERSE ORDERS OF BOTH THE ASSE SSING OFFICER AND THE LD. CIT(A) SHOULD BE REVERSED. 2. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBI TRARY AND BASELESS ADDITION OF GROSS PROFIT ( IN SHORT G.P ) OF RS. 9 47 000/- IN THE TRADING A/C MADE IN ASSESSMENT OWING TO THE ALLEGED FAILURE OF THE ASSE SSEE FIRM TO FURNISH THE ITEM- WISE DETAILS OF VALUATION OF CLOSING STOCK COMPLET ELY OVERLOOKING OR OTHERWISE DELIBERATELY IGNORING THAT THE ITEM-WISE VALUE OF T HE CLOSING STOCK OF THE GOODS/ PRODUCTS HAVE BEEN DULY FURNISHED ALONG WITH THE TA X AUDIT REPORT U/S 44AB OF THE ACT IN THE FORM OF A DETAILED CHART CONTAINED I N ANNEXURE - IV TO THE TAX AUDIT REPORT FILED IN COURSE OF ASSESSMENT VIDE LET TER DT 17.06.2010 IN ITA NO.530/KOL/2016 M/S. QUICK ENERGY A.Y.2008-09 2 COMPLIANCE TO THE A.O'S NOTICE U/S 142(1) DT. 30.09 .2009 & 07.06.2010 AND SURPRISINGLY FOR THE ALLEGED FAILURE THE G.P RATE O F THE PRECEDING YEAR WAS BLINDLY & UNSCRUPULOUSLY ADOPTED FOR MAKING THE ADDITION. T HE ARBITRARY ADDITION MADE SHOULD BE WHOLLY DELETED. 3. THE ASSESSEE IS A PARTNERSHIP FIRM AND CARRIES O N BUSINESS AS DEALER IN FOREIGN LIQUOR. FOR A.Y.2008-09 THE ASSESSEE FILED RETURN OF INCOME SHOWING TOTAL INCOME OF RS.16 50 800/-. IN THE COURSE OF ASSESSMENT PROCEED INGS THE AO NOTICED THAT THE ASSESSEE HAD SHOWN GROSS PROFIT AT RS.37.71 LAKHS O N A TURNOVER OF RS.1110.27 LAKHS WHICH RESULTED IN GROSS PROFIT PERCENTAGE OF 3.40%. THE AO NOTICED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. A.Y.2007 -08 THE ASSESSEE HAD DECLARED GROSS PROFIT RATE AT 4.25% ON A TURNOVER OF RS.1356 .92 LAKHS. THE AO WAS OF THE VIEW THAT THERE WAS A STEEP FALL IN THE GROSS PROFIT RAT E. THE AO FURTHER OBSERVED IN THE ORDER OF ASSESSMENT THAT THE ASSESSEE HAD NOT FURNISHED I TEM-WISE VALUATION OF CLOSING STOCK. ACCORDING TO THE AO THE ASSESSEE FURNISHED ONLY IT EM-WISE DETAILS OF CLOSING STOCK BUT HAD NOT FURNISHED THEIR VALUE. HE WAS OF THE V IEW THAT IN THE CIRCUMSTANCES IT CAN BE INFERRED THAT THE CLOSING STOCK WAS IMPROPERLY V ALUED TO SHOW LESS GROSS PROFIT. THE AO THEREAFTER APPLIED THE GROSS PROFIT RATE AT 4.25 % ON THE TURN OVER AND MADE AN ADDITION OF RS.9 47 000/- TO THE INCOME OF THE ASSE SEE AS FOLLOWS :- SALE RS.1110.27 LAKHS GP RATE TAKEN 4.25% THE AMOUNT OF GP COMES TO RS.11 10.27 X 4.25/100=RS.47 18 000/- THUS THE ADDITION ON ACCOUNT OF GP COMES TO RS.(47 18 000 37 71 000) = RS.9 47 000/-. 4. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT T HE ENTIRE DETAILS OF VALUE OF ITEMS OF CLOSING STOCK WAS AVAILABLE IN THE TAX AUDIT REPORT . COPY OF THE SAID TAX AUDIT REPORT IN FORM.3CD IS AVAILABLE AT PAGE NO.10 TO 24 B OF THE ASSESEES PAPER BOOK. PAGES 24A AND 24B GIVE THE BREAKUP OF CLOSING STOCK AS ON 31.03.2008 THEIR VALUE ITEM-WISE. THE ASSESSEE SUBMITTED BEFORE CIT(A) THA T THE AO HAS PROCEEDED ON A TOTALLY WRONG BASIS TO COME TO A CONCLUSION THAT TH E VALUE OF CLOSING STOCK HAS NOT BEEN PROPERLY DISCLOSED BY THE ASSESSEE. BESIDES TH E ABOVE THE ASSESSEE SUBMITTED THAT THE LOWER MARGIN IN THE PRESENT ASSESSMENT YEAR WAS BECAUSE OF LICENCE BEING GRANTED TO A LARGE NUMBER OF SHOPS WHO SELL INDIAN MADE FO REIGN LIQUOR. AS A RESULT THERE WAS ITA NO.530/KOL/2016 M/S. QUICK ENERGY A.Y.2008-09 3 A COMPETITION AND THE ASSESSEE HAD TO COMPROMISE ON ITS MARGIN. THE CIT(A) DID NOT AGREE WITH THE SUBMISSIONS MADE BY THE ASSESSEE. HE HELD THAT THE ASSESEE FAILED TO ESTABLISH THAT THE GROSS PROFIT RATE SHOWN IN THE R ETURN IS CORRECT. THE CIT(A) THEREFORE CONFIRMED THE ORDER OF AO.. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HAS RAISED GROUND NOS. 1 AND 2 BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE CIT(A). IT WAS FURTHER ARGUED BY HIM THAT THE AO HAD NOT RESORTED TO REJECTION OF BOOKS OF ACCOUN TS U/S 145(3) OF THE INCOME TAX CT ACT 1961 (ACT). IT WAS ARGUED THAT WITHOUT REJECTI NG BOOKS OF ACCOUNTS IT WAS NOT POSSIBLE TO ESTIMATE THE INCOME. IT WAS ALSO ARGUED BY HIM THAT NO DEFECTS WHATSOEVER HAVE BEEN POINTED OUT BY THE AO IN THE BOOKS OF ACC OUNTS SO AS TO DIS-REGARD THE BOOK RESULTS. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF PRINCIPAL C.I.T. VS BHAWANI SILICATE INDUSTRIES (2016) 65 TAXMANN.COM 196 (RAJASTHAN). IN THE AFORESAID DECISION IT WAS H ELD BY THE HONBLE RAJASTHAN HIGH COURT THAT MERELY BECAUSE THERE WAS SOME DEFICIENCY IN QUALITY WISE RECORD IN THE BOOKS OF ACCOUNTS IT CANNOT BE A GROUND TO REJECT THE BOOKS OF ACCOUNT. REFERENCE WAS ALSO MADE BY ITAT KOLKATA BENCH IN THE CASE OF SQ UAR CONCERN VS ITO (2015) 68 SOT 23 (KOLKATA-TRIB.)WHEREIN IT WAS HELD THAT WHEN DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESEE ARE NOT POINTED OUT THE P ROVISION OF SECTION 145 CANNOT BE INVOKED. 7. THE LD. DR RELIED ON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESEE FAILED TO SUBSTANTIATE THE REASONS FOR FALL IN THE GROSS PROF IT RATE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS CLEAR FROM THE PERUSAL OF THE ORDER OF AO THAT THE ONLY REASON GIVEN BY THE AO FOR DISBELI EVING THE PROFITS DECLARED BY THE ASSESSEE IS THAT ITEM-WISE VALUE OF CLOSING STOCK H AD NOT BEEN GIVEN BY THE ASSESSEE. ITA NO.530/KOL/2016 M/S. QUICK ENERGY A.Y.2008-09 4 AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE A SSESSEE THESE DETAILS WERE AVAILABLE IN THE TAX AUDIT REPORT WHICH WAS FILED ALONG WITH THE RETURN OF INCOME. THE SAME IS AT PAGE 24A AND 24B OF THE ASSESSEES PAPER BOOK. T HEREFORE THE FUNDAMENTAL BASIS ON WHICH THE AO CAME TO THE CONCLUSION THAT THE GROSS PROFIT DECLARED BY THE ASSESEE WAS LOW WAS ERRONEOUS. APART FROM THIS THE AO HAS NOT REJECTED THE BOOK RESULTS WHILE INVOKING THE PROVISION OF SECTION 145(3) OF THE ACT . REJECTION OF BOOKS OF ACCOUNTS IS A SINE QUO NON FOR DISREGARDING THE PROFITS SHOWN I N THE BOOKS OF ACCOUNT. UNDER SECTION 145(3) OF THE ACT THE AO CAN REJECT THE BO OK RESULTS ONLY IF HE IS NOT SATISFIED WITH THE COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE OR THE METHOD OF ACCOUNTING FOLLOWED BY TH E ASSESSEE IS NOT IN ACCORDANCE WITH THE PROVISION OF SECTION 145(2) OF THE ACT OR INCOME HAS NOT BEEN COMPUTED IN ACCORDANCE WITH THE ACCOUNTING STANDARD U/S 145(2) OF THE ACT. A PERUSAL OF THE ORDER OF ASSESSMENT SHOWS THAT NO REASONS WHATSOEVER HAVE BEEN ASSIGNED BY THE AO FOR DISREGARDING THE BOOK RESULTS. HENCE THE ACTION OF THE AO IN ESTIMATING THE INCOME OF THE ASSESSEE FROM BUSINESS AND CONSEQUENT ADDITION MADE TO THE TOTAL INCOME CANNOT BE SUSTAINED. THE DECISION ON WHICH THE LD. COUNSEL PLACED RELIANCE BEFORE US FULLY SUPPORTS THE PLEA RAISED BY THE ASSESSEE. FOR THE R EASONS GIVEN ABOVE WE DELETE THE ADDITION ON ACCOUNT OF GROSS PROFIT OF RS.9 47 000 /- MADE BY THE AO. GROUND NOS. 1 AND 2 ARE ACCORDINGLY ALLOWED. 9. GROUND NOS. 3 AND 4 RAISED BY THE ASSESSEE READ AS FOLLOWS :- 3. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBITRARY AND ESTIMATED ADHOC DISALLOWANCE OF EXPENSE OF RS. 1 59 4151- @ 5 0% OF THE TOTAL EXPENSE OF RS. 3 18 8301- CLAIMED UNDER THE HEAD ' CARRIAGE OU TWARD' MADE IN ASSESSMENT MERELY ON ASSUMPTION AND PRESUMPTION WITHOUT CONSID ERING THE FACTS AND THE DETAILS OF THAT A/C FURNISHED AND INSTEAD SIMPLY CO MPARING PRECEDING YEAR'S RESULT WITHOUT BRINGING ON RECORD ANY CONVINCING MATERIAL AND/OR EVIDENCE LEGALLY JUSTIFYING THE DISALLOWANCE. THE ACTIONS OF BOTH TH E ASSESSING OFFICER AND THE LD. CIT(A) WERE WHOLLY UNJUSTIFIED UNCALLED FOR AND BA D IN LAW. 4. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS WHOLLY WRONG AND UNJUSTIFIED IN CONFIRMING THE ARBI TRARY AND ESTIMATED ADHOC DISALLOWANCE OF EXPENSE OF RS. 83 512/- @ 50% OF TH E TOTAL EXPENSE OF RS. 1 67 024/- CLAIMED UNDER THE HEAD.' UNLOADING CHARG ES' MADE IN ASSESSMENT ITA NO.530/KOL/2016 M/S. QUICK ENERGY A.Y.2008-09 5 MERELY ON ASSUMPTION AND PRESUMPTION WITHOUT CONSID ERING THE FACTS AND THE DETAILS OF THAT A/C FURNISHED AND INSTEAD SIMPLY CO MPARING PRECEDING YEAR'S RESULT WITHOUT BRINGING ON RECORD ANY CONVINCING MATERIAL AND 1 OR EVIDENCE LEGALLY JUSTIFYING THE DISALLOWANCE. THE ACTIONS OF BOTH TH E ASSESSING OFFICER AND THE LD. CIT(A) WERE WHOLLY UNJUSTIFIED UNCALLED FOR AND BA D IN LAW. 10. THE AO NOTICED THAT THE CARRIAGE OUTWARD EXPENS ES OF THE ASSESSEE WERE CLAIMED AT RS.3 18 830/- COMPARED TO RS.1 20 610/- CLAIMED IN THE EARLIER A.Y.2007- 08. SINCE HE TURNOVER OF THE ASSESSEE WAS LESS THAN THE EARLIER YEAR THE AO WAS OF THE VIEW THAT THE INCREASE IN CARRIAGE OUTWARD EXPENSES WAS NOT JUSTIFIED. HE ALSO FOUND THAT THESE EXPENSES WERE NOT PROPERLY VOUCHED. THE AO THEREFORE DISALLOWED 50% OF THE EXPENSES CLAIMED UNDER THE HEAD CARRIAGE OUTWA RD WHICH RESULTED IN ADDITION OF RS.1 59 415/- TO THE TOTAL INCOME OF THE ASSESSEE. 11. SIMILARLY THE ASSESSEE CLAIMED UNLOADING EXPENS ES AT RS.1 67 023/-. THE AO FOUND THAT IN THE EARLIER ASSESSMENT YEAR THERE WAS NO CLAIM OF EXPENSES UNDER THE HEAD UNLOADING EXPENSES . HE ALSO FOUND THAT UNLO ADING EXPENSES WAS NOT SUPPORTED BY PROPER VOUCHERS AND BILLS. THE AO THEREFORE DISA LLOWED 50% OF THE UNLOADING EXPENSES WHICH RESULTED IN AN ADDITION OF RS.83 512 /- TO THE TOTAL INCOME OF THE ASSESSEE. 12. ON APPEAL BY THE ASSESSEE AGAINST THE AFORESAID ADDITION THE CIT(A) CONFIRMED THE ORDER OF AO HOLDING THAT THE ASSESSEE FAILED TO SUBSTANTIATE INCREASE IN EXPENSES UNDER THE AFORESAID HEADS. 13. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE H AS RAISED GROUND NOS. 3 AND 4 BEFORE THE TRIBUNAL. 14. WE HAVE HEAD THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. DR. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CARRIAGE OUTWARD EXPENSES ARE INCURRED WHEN THERE ARE BULK SALES. IT WAS SUBMITTE D BY HIM THAT DURING THE PREVIOUS YEAR THE BULK SALES WERE MUCH MORE THAN IN A.Y.2007 -08 AND THEREFORE THERE WAS AN ITA NO.530/KOL/2016 M/S. QUICK ENERGY A.Y.2008-09 6 INCREASE IN CARRIAGE OUTWARD EXPENSES. SIMILARLY FO R UNLOADING EXPENSES THE LD. COUNSEL POINTED OUT THAT DUE TO TRAFFIC CONGESTION THE STOCKS ARE NOT RECEIVED IN THE BUSINESS PREMISES OF THE ASSESSEE AND HAD TO BE UNL OADED AND BROUGHT TO THE SHOP FROM THE TRUCKS WHICH ARE PARKED AT A LITTLE DISTAN CE FROM THE BUSINESS PREMISES OF THE ASSESSEE. THIS WAS THE REASON WHY UNLOADING EXPENSE S WERE NOT CLAIMED IN THE PAST AND BEING CLAIMED ONLY IN THIS ASSESSMENT YEAR. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THERE IS SOME MERIT ON THE PLEA PUT FORTH ON BEHALF OF THE ASSESS EE. WE ARE HOWEVER OF THE VIEW THAT THE INCREASE IN THE AMOUNT OF CARRIAGE OUTWARD CHAR GES AND QUANTUM OF UNLOADING EXPENSES ARE DISPROPORTIONATE. NEVERTHELESS TAKING INTO ACCOUNT THE REASONS GIVEN BY THE ASSESSEE BEFORE US WE ARE OF THE VIEW THAT DIS ALLOWANCE OF 50% OF THE EXPENSES IS ON THE HIGHER SIDE. KEEPING ALL FACTS AND CIRCUMSTA NCES IN MIND WE ARE OF THE VIEW THAT DISALLOWANCE OF 25% OF THE EXPENSES WOULD BE J UST AND FAIR. WE HOLD AND DIRECT ACCORDINGLY AND ALLOW PARTLY GROUND NOS. 3 AND 4. 16. IN THE RESULT THE APPEAL BY THE ASSESEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 22.11.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22.11.2017. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. QUICK ENERGY 46 STRAND ROAD KOLKATA-70000 7. 2. D.C.I.T. CIRCLE-43 KOLKATA. 3. C.I.T. (A)-21 KOLKATA. 4. C.I.T.-15 K OLKATA. 5. CIT(DR) KOLKATA BENCHES KOLKATA. TRUE COPY BY ORDER SR. PRIVA TE SECRETARY HEAD OF OFFICE/DDO ITAT KOLKATA BENCHES ITA NO.530/KOL/2016 M/S. QUICK ENERGY A.Y.2008-09 7